Knowledge Based Capital Sweet-spot Innovation in a Company Dobrev.pdf · 2021. 4. 25. · Colombia Grupo Nutresa abcd ef China Mengniu abcd ef Turkey Yildiz abcd ef Japan Meiji abcd

Knowledge

Based Capital

in a Company

Innovation

Sweet-spot

Stefan Dobrev

OECD

13th February 2012

13th February 2013 1

Globally, Nestlé is the world’s largest food

company

The USD > 10bn Food & Beverage Companies in 2011

Fo

od

& B

eve

rag

e S

ale

s (

Bil

lio

ns o

f U

SD

)

CHF 83.6 billion in sales in 2011

328,000 employees

461 factories

10,000 brands

1 billion Nestlé products sold every day

Locally, we are facing intense competition

13.6

11.7 11.6 10.8 10.6 10.6

9.1 8.4

7.4 7.4

Highest Nestlé Market Shares 2012 (% of Packaged Food Retail Value)

13th February 2013 2

7.6 7.8

8.0 8.4

8.8 9.1

0.0 0.1

4.9 5.0 5.0 4.8

2007 2008 2009 2010 2011 2012

Brazil Market Shares (% of Packaged Food Retail Value)

Nestlé SA Brf Brasil Foods SA

Source: Euromonitor

In key markets, we are competing against

strong local players

Market Leader 2nd 3rd 4th 5th 10th 12th 51st

Malaysia abcdef Lam Soon

Philippines abcdef San Miguel

Brazil abcdef Brf Brasil

Chile abcdef Fonterra

Germany abcdef Unilever

Indonesia Indofood abcd

ef

Australia Kirin abcd

ef

Nigeria Friesland abcd

ef

India Gujarat Co-op abcd

ef

Poland Unilever abcd

ef

Egypt Savola abcd

ef

Saudi Arabia Almarai abcd

ef

Russia PepsiCo abcd

ef

Mexico Grupo Bimbo abcd

ef

South Africa Tiger Brands abcd

ef

Colombia Grupo Nutresa abcd

ef

China Mengniu abcd

ef

Turkey Yildiz abcd

ef

Japan Meiji abcd

ef

Source: Euromonitor

Knowledge is a key competitive advantage

of a large global company

13th February 2013 4

Competitor

Co

mp

etito

r

Competitor

Co

mp

eti

tor

5

Nestlé can deploy knowledge

across growing billionaire brands

Size

13th February 2013

Ex

pe

rtis

e

Food Safety

Packaging

Texture

Taste

Drying

Systems

Data

13th February 2013 6

Cross-category technologies enable us to

leverage our scope

Businesses

Economies of scope drive efficiency in our

R&D organisation

7

100

117 126

142 146

0

20

40

60

80

100

120

140

160

Nestlé Competitor 1 Competitor 2 Competitor 3 Competitor 4

Ind

ex

, N

es

tlé

= 1

00

Nestlé R&D Efficiency Advantage vs. Competitors (R&D Intensity Adjusted For Product Mix)

13th February 2013

8

Scale makes it worthwhile to own the

innovation value chain

Dedicated

Engineering &

Deployment

Product &

Technology

Development

In-house

Fundamental

Research

Nestlé Research Centre

Nestlé Institute of Health Science

Clinical Development Unit

31 Product Technology Centres

and R&D Centres

Product Technology Centres

and Application Groups

to support 460 factories

13th February 2013

Most of Nestlé’s value is in knowledge

based capital

Debt 14

Market Value 171

Tangible Fixed 24

Other Knowledge Based Capital

127

186 186

Enterprise Value Assets

Nestlé Implicit Capital Composition (CHFbn, FY2011)

Maggi

Nestle Pure Life

KitKat

Purina

Nescafé

Nestlé

13th February 2013 9

Selected

Brands*

35

*Source: BrandFinance

We go to great lengths to protect it

269

224

186 179 170

Patent Co-operation Treaty Applications 2012

132

295

16,000

24,000

0

5,000

10,000

15,000

20,000

25,000

30,000

0

50

100

150

200

250

300

350

400

450

2006 2012

Nestlé Patents

New Total

13th February 2013 10

Source: WIPO

Knowledge based capital is costly

22%

6%

Marketing + R&D CapEx

Nestlé Knowledge Based Investment as

Percent of Sales (2011)

13th February 2013 11

0.6 0.7

0.9 1.0 1.1 1.2

1.5 1.5 1.6 1.8 1.8 1.8 1.9 2.0 2.1 2.1

2.3 2.4

2.6 2.7 2.7 2.7 2.8 2.9 3.0

3.4 3.4 3.6 3.7 3.7

4.7

PolandTurkey

South AfricaRussian Federation

BrazilItaly

IrelandChina

NorwayNetherlands

United KingdomCanada

European UnionBelgium

FranceWorld

AustraliaOECD members

IcelandSingapore

AustriaGermany

United StatesDenmark

SwitzerlandKorea, Rep.

JapanNestlé*

SwedenFinland

Israel

R&D Spend as % GDP/Gross Margin

Source: UNESCO, except Nestlé data

*Percent of Gross Margin

13th February 2013 12

Knowledge investment is risky - only half

of our developments make it to market

0%

20%

40%

60%

80%

100%

120%

Start Go to Concept Go toDevelopment

Go toIndustrialization

Go to Launch Go to PostLaunch

Cumulative Survival Rate of R&D Projects

All Projects & Years

Started in 2011

Improvement Pilot

Not everything gets patented

0

100

200

300

400

500

600

2009 2010 2011 2012

Nestlé Recorded Ideas And Patents

Ideas Patents

13th February 2013 13

14

What happens to the rest?

Knowledge Block

Knowledge

Block

Knowledge Block

Knowledge

Block

Knowledge

Block

Product/Process

Product/

Process

Technical

Assistance

Technical

Assistance

Product/Process

Flow of

Knowledge

13th February 2013

Nestlé scientists publish over 200

scientific articles every year

0

5

10

15

20

25

30

35

Imp

ac

t F

ac

tor

Peer Reviewed Articles

Impact Factor of Nestlé Scientific Articles (2012)

13th February 2013 15

2012 Total:

240 Peer reviewed articles

Positive externalities of knowledge based

capital can misalign investment incentives

13th February 2013 16

Accruing

to

Company

“Social

Surplus”

Investment

(Opportunity Cost)

Return

(Benefit)

Total

Social

Benefit

Accruing

to

Company

“Social

Surplus”

Investment

(Opportunity Cost)

Return

(Benefit)

Total

Social

Benefit

Invest in

Knowledge Based Capital

Do Not Invest in

Knowledge Based Capital?

Summary

The social benefit of corporate risk taking in knowledge exceeds the private

benefit

Therefore, it is worthwhile encouraging risk taking beyond what companies

would rationally do if left to their own devices

Possible means include

Improve Efficiency: create knowledge infrastructure

Universities, Clusters

Sharing Hubs

Education

Improve Returns: facilitate spin-offs (monetise “excess” knowledge)

Improve Cost: fund early stage research

13th February 2013 17